Tuesday 17 January 2012 06.01 EST
First published on Tuesday 17 January 2012 06.01 EST

Coming into office we knew that radical strategies were needed to reform our broken welfare system. The Centre for Social Justice, established by Iain Duncan Smith, began that radical thinking which we have carried into government. Now a key part of our reforms in the welfare reform bill, the universal credit, which replaces a complex myriad of means-tested benefits, has the support of all parts of both the House of Commons and the House of Lords.

Like us, the British public firmly believe we need a welfare state that provides support for those who need it, ensures work always rewards more than a life on benefits and encourages progression once in work. The underpinning principle for any reformed welfare state is that it will always be there for people with genuine need; and that principle is clear in the welfare reform bill.

But through this reform process we must not lose sight of the fact that we currently have a welfare system whose cost has spiralled out of control, in good times and bad, and has now trapped generations into worklessness.

Ensuring the system is sustainable has required some very difficult decisions – such as limiting the contributory employment and support allowance to one year. I regret the decision taken by the House of Lords last week to amend the welfare reform bill to lengthen this time limit to two years. This will cost the state £1.1bn over the next three years alone – which, as the leader of the opposition has acknowledged, means "finding the money from somewhere else".

The difficult reality is that, especially in these financially testing times, we have a duty to ensure that taxpayers' money is spent on those with the most need – those who are too sick or disabled to work and those with the least money. We have already made clear that the time limit would not apply to the most severely disabled people.

This week the House of Lords will debate our plans to replace disability living allowance (DLA) with the new benefit personal independence payment (PIP). The PIP will include a new face-to-face assessment with a health professional and regular reviews – entirely reasonable requirements, which are absent from the current, lax system.

We spend around £12.6bn a year on DLA, which has risen 87% since 1997, but cannot guarantee the support is always going to those who need it most. Most people who claim DLA have conditions that change over time, yet the vast majority of people get it for life without any inbuilt checks. As a result, figures show that in just one year, over £600m was paid out to individuals whose condition had changed and were no longer eligible for the benefit they were receiving. Equally concerning to me is that £190m is underpaid, despite individuals experiencing a deterioration in their condition.

Under this new benefit, support will be focused on those who need it most to be able to live an independent life.

Throughout the development of our reforms we have listened to disabled people and have acted on their feedback. We have announced that we will no longer be removing the DLA and PIP mobility component from people in residential care homes. We have made significant changes to the criteria for the face-to-face assessment. And we have decided that we will not be increasing the qualifying period for PIP to six months. All these changes are a direct result of the comments we received for disabled people and the organisations representing them.

We will continue to work with disabled people to develop the important new benefit and I urge disabled people and disability organisations to get involved in our further consultation, which ends on 30 April 2012.